Kimberly DeCambre, a disabled, 59 year old resident of Massachusetts, receives public benefits based upon financial need. DeCambre is also the sole beneficiary of a court-created irrevocable Special Needs Trust funded with $330,000 from a personal injury lawsuit. In 2013, the Brookdale Housing Authority (BHA) determined that DeCambre was no longer eligible for a Section 8 housing voucher because the Special Needs Trust distributed more than $60,000 during the year to pay for administrative trustee fees; cell phone, cable, and internet bills; veterinary care for cats; dental and medical costs; and travel expenses. A hearing officer upheld the BHA’s decision.
DeCambre filed a lawsuit in state court against the BHA, and the case was removed to federal court. In the lawsuit, DeCambre claimed the BHA violated her civil rights by counting the payments from the trust as income. She argued that it was improper to treat the distributions from the trust as income when, under Department of Housing and Urban Development (HUD) rules, the same payments would not be considered income had she simply taken the settlement as a lump sum outside of a trust. The district court ruled against DeCambre. Although the court said it sympathized with Special Needs Trust beneficiaries who struggled to maintain eligibility for Section 8 housing assistance, the court said it was “unable to find any regulatory support for DeCambre’s argument that [distributions from her Special Needs Trust] must be excluded from annual income … .” (My blog post on the DeCambre federal district court opinion can be found here.)
DeCambre appealed. The U.S. Court of Appeals for the First Circuit reversed. The appeals court held that the “BHA improperly counted the distributions from the principal of [Ms.] DeCambre’s settlement-funded irrevocable trust toward her annual income.” According to the court, “we can discern no reason to exclude from annual income (as the regulations clearly do) lump-sum personal injury settlement proceeds paid directly to a tenant … yet not exclude those same proceeds merely because they ‘[g]o to, or on behalf of’ a tenant … through a trust of which the tenant is the beneficiary.”
The opinion of the U.S. Court of Appeals for the First Circuit is annexed here – DeCambre v. Brookline Housing Authority
For additional information concerning special needs trusts and disability planning, visit: https://vanarellilaw.com/special-needs-disability-planning/